Good morning. Good morning, everyone. Thank you for interest in Iberdrola. It is a great pleasure to welcome you to the presentation of the Results for the First Quarter of the Financial Year 2013. This event is structured in a similar manner to our previous result presentation. However, today, we’ll start with a different type of presentation with the aim to increase the use of new technologies while trying to optimize the time that you are really giving to us, avoiding loss of time when you come to our facilities and all other issues.

The aim of the company is to call a phase-to-phase event in the second half of the year similar to the one set in London back in October, on the occasion of our outlook for the years 2012-2014. Coming back to this event, it will begin with final review of the results by our senior management team which will then be followed by a Q&A session.

With that indeed, we will first take questions submitted via the Web. However, in the interest of time and to avoid the high level of repetitions, I would ask that you submit no more than three questions at a time. We highly recommend you to use this channel as the only preliminary way to submitting your queries. After the question from the Web, we will then move to the questions from the telephone. We would expect that the event will last around one-hour-and-a-half, hoping that you will find the presentation informative and productive.

Now, I will hand over to our Chairman and CEO, Mr. Ignacio Galán. Please, Mr. Chairman.

Ignacio Galán

So, good morning, everyone. First of all, I would like to thank you for attending this result presentation we are holding today through the webcast. With me, normally, as usual, José Luis San Pedro, Chief Operating Officer; and José Sáinz Armada, Chief Financial Officer.

Today’s presentation is divided in four main section. I will just start by briefly describing the highlights of the period. The Chief Financial Officer will later analyze the result in detail and give a quick overview of the group financial position. Finally, I will draw a number of brief conclusion, after which we shall be pleased to answer any question you may have.

The first quarter of the year has been marked by the good operational performance of our businesses as the gross margins evolution shows with a 5.5% increase driven by renewables and generation and supply. Additionally, the efficiency measures we are implementing have allowed to produce our net operating expenses to gross margin ratio by 4.6%. Net debt has been reduced by €2 billion helping us to improve our financial ratios and strength of our balance sheet.

These highlights reveal the progressive fulfillment of the targets including the company’s 2012 to 2014 outlook in spite of numbers of a typical aspect which have affected this quarter results but which we will partially recover along 2013 and 2014 as I will explain later. As I just said, gross margin has rise 5.5% to almost €3.6 billion, thanks to the good operational performance of our businesses in particular renewables and generation and supply. We compensate the decline in networks in Brazil. All in all, gross margin coming from the regulated business increased by 1.6%.

The strong performance of renewables with 20.1% rise in the period is due to 70% increase in output particularly wind production in Spain. We have been growing by more than 52%.

In the generation and supply businesses, gross margin has increased 11.1%, thanks to our large customer base in UK and the growth in hydro production. On the other hand, gross margin in networks has decreased by 5.8%, negatively impacted by two main aspects in Brazil; the tariff review in Elektro whose effect is being recorded from August 2012 onwards, and the temporary extra charges on electricity as a consequence of the growth in the country that I will explain as well later on.

One of Iberdrola’s steady pillars has always been operational efficiency. And in the view of the result obtained in this first quarter, the last efficiency measures implemented by the company are now bearing fruit.

In defense, while gross margin is growing by 5.5%, net operating expenses have remained almost flat, allowing the company to reduce its net-operational-expenses-to-gross-margin ratio by 4.6% from 25.9% to 24.7%.

In spite of the good operational performance of our businesses, several atypical effects have impacted this quarter result. Such effects explained the 3.7% fall in EBITDA, which amount €2.279 million, as well as the 14.1% decline in net profit to €879 million.

Some of these factors will be recovered or compensated along the following months. This is the case of temporary additional cost on electricity in our distribution companies, everywhere in Brazil, with a negative impact of €68 million to be recovered through the annual tariff review.

Also, as a result of the more ambitious objectives including the Energy Efficiency Program introduced in United Kingdom, ECO, expenses recorded in the first three months of 2013 are €42 million higher than those accounted in the same period of previous year under the CERT/CESP programs, whose impact was mainly booked on the second half of 2012.

Finally, as of March 30, 2012, a 1 percentage point reduction in UK corporate tax rate were registered lowering the expense for the period €92 million. In 2013, a 2-percentage-point reduction in the corporate tax is expected to be applied in United Kingdom which represents approximately €160 million for our sales, although its effect will be accounted in the second half of the year upon formal approval of the measure. Taking into account these effects, it will be recovered and compensated, group EBITDA would have increased by 0.6% and net profit would have rise 2.8%.

As regard of operating result of each of our businesses, efficient improvement in networks have led to 4.7% reduction in net operating expenses in spite of accounting adjustment in United Kingdom. These accounting adjustments introduced so that our criteria to the new regulatory standards implies a reduction in the amount of cost capitalized.

The efficient improvement, together with the regulated asset base increase in United Kingdom and the longer contribution of Iberdrola U.S.A. have partially compensated the current EBITDA adjustment in Brazil in effect. In Brazil, EBITDA in networks increased by almost 11%.

In generation and supply, largest hydro production reserves, as well as increasing customer base in UK, have contributed to partially compensate new fiscal measures introduced in Spain with €96 million ALS impact on EBITDA that should be added to the effect of the already mentioned efficiency program in United Kingdom.

Additionally, two other factors distort the comparison with previous year: the cancellation of CO2 allowances in 2013, with any part of €41 million; and the effect of several judicial decisions, which despite being positive in 2013 to €52 million, are lower than those in previous year of €100 million.

Finally, in renewables, EBITDA has grown 20.8%, driven by a very good wind results and efficiency improvement. Wind production has increased by 70% to 9.8 gigawatt hours and in spite of divestment of asset in non-core countries, while the net operating expenses to average operating capacity ratio has been reduced by 5.9%.

It’s worth to mention the renewable result has been obtained despite the new fiscal measure introduced in Spain by Law 15/2012 which had a negative impact of €26 million and the challenges on the Spain special remuneration brought by Royal Decree-Law 2/2013.

I would like to stress, the levies has increased in the period 62%, whilst eliminated the effect of judicial decision in 2013 and 2012, offsetting the operational improvement of the company. In fact, in this first quarter of the year, the amount paid in levies is, for the first time, similar to the total group net operating expenses.

This means that costs associated to personnel require to manage and operate 46,000 megawatts, more than 1 million kilometers of distribution lines plus additional 36,000 kilometers of transmission line, 4,000 primary substation and 6,000 power transformer, and 1.3 million secondary substation in around 250 wind farms, are lower than those by far the amount of company has to pay in fiscal charges excluding corporate income tax.

This is particularly relevant in Spain and United Kingdom where levies are more than 30% up of the net of personnel expenses. Regarding cash flow, all our businesses generate cash flow exceeding net investment, following one of our main 2012 to 2014 guidelines. Total operating cash flow amounts €1.7 billion after deducting investment which figure reached €1.1 billion.

All these things will be explained with more detail now by CFO, José Sáinz Armada.

José Sáinz Armada

Thank you, chairman. Good morning. We shall now proceed to briefly analyze some relevant issues of the income statement, the performance of the different businesses and the group’s financial situation. As the chairman has pointed out, levies have increased more than 2 times take away all the operating improvements of the group as we will see during this part of the presentation.

Net sales are 1.2% down to €9.2 billion and procurements fall 4.9% to €5.6 billion due to our lower cost mix in the liberalized business. As a consequence, gross margin rises 5.5% to almost €3.6 billion even considering a €62 million negative FX impact. With all businesses and countries growing, except Brazil, that will recover part of the negative extraordinary impacts this year and in 2014.

Net operating expenses increased only 0.8%, including €31 million of a positive FX impact.

Efficiency measures and charges taken in 2012 explain the 3.8% reduction in net personnel expenses.

Net external services are up 5.6%, affected by a negative €35 million impact in this quarter coming from the attendance bonus and annual shareholder meeting’s related costs that in 2012 were accounted in the second quarter, and a €17 million negative impact coming from the UK due to an accounting-treatment modification to adopt the company criteria to the new regulatory framework standards in distribution.

Effects that have been partially compensated by a €19 million positive impact of indemnities received by the U.S. networks linked to the commissioning of nuclear plants.

Levies more than doubled to €410 million that the group has paid in this quarter. The €224 million increase comes from Spain with €180 million, of which €122 million, €96 million in the ordinary regime and €26 million in renewables, are due to the 7% generation tax, the hydro canon and the nuclear tax.

In addition, there is a €48 million unfavorable comparison with 2012 in relation to positive court rulings, which include €100 million impact in 2012 due to the Spanish Supreme Court ruling on the social tariff which is not fully compensated via a €52 million positive impact linked to the reversion of Castilla-La Mancha eco tax after another court ruling in 2013.

UK at €42 million due to higher levies linked to the new energy efficiency programs for 2013 versus 2012. The levies this year are linearly accounted, while in 2012, impacts were mainly during the second half of the year. As a consequence, UK levies comparison will strongly improve in the second half of the year. Additionally, there are several taxes and levies that Iberdrola has appealed to the courts and there are still pending decisions that hopefully will impact positively our P&L in this or next years.

As a consequence, reported EBITDA decreased 3.7%, including a €38 million of negative FX impact. The 20% growth in renewables is compensated by a 6.1% fall in networks due to the Brazil performance and a 9.5% decrease in generation and supply due to the rising taxes. Renewables and regulated business contribute 72% of the total EBITDA.

Networks EBITDA is down 6.1% to €1 billion, due to a 51.6% fall in Brazil that is not compensated by the 10% growth in the rest of geographies. Brazil performance will improve at the end of the year as first half results will include several negative impacts to be partially recovered during 2013 and 2014. Spain represents 38% of EBITDA, the UK 22%, the U.S. 26% and Brazil 14%.

At gross margin level, on the positive side, we have: in Spain, the 2013 tariff order; in the UK, higher revenues linked to the higher asset base; and in the U.S., higher revenues as a result of the rate cases, the contribution of the main line and positive higher ForEx impacts linked to lower cost of supplies that make the gross margin in these three markets rise by 5.8% to €1.2 billion.

But in Brazil, as advanced in the 2012 results, several negative impacts have reduced its gross margin by 39% or €154 million, offsetting the 5.4% growth in demand in this market due to, one, the Elektro tariff revenue that reduces gross margin by €39 million during the quarter, including €30 million directly linked to the tariff reduction and another €9 million as a refund of part of the excess collected in the period, August 2011-August 2012.

Temporary extra charges impact to the networks with a total effect in distribution business of €68 million. That will be recovered through annual tariff reviews, Neo in April and Elektro in August. Another €104 million negative impact has already been covered by the government. An additional negative €11 million impact in the generation business will not be recovered. Finally, the real has depreciated 16% against the euro, taking another €38 million from the gross margin.

Net operating expenses in this area improved by 5.7% due to the efficiency gains, mainly in Spain and the U.S., driving personnel expenses down by 2%. And in the U.S., net external services included positive one-off compensations of €19 million. And on the negative side, in the UK, there is an accounting adjustment, as mentioned, of minus €17 million to adopt the company criteria to new regulatory framework standards. In Brazil, expenses rise due to inflation and demand growth.

Moving to the generation and supply business that includes Spain, the UK and Mexico. EBITDA is down 9.5% to €750 million due to the levies multiplying by 4 times from €59 million to 100 – sorry, to €212 million, thus, wiping out the 11% improvement in gross operating margin and the 5.5% improvement in net operating expenses. By geography, Spain represents 64% of EBITDA; the UK, 24%; and Mexico, 13%. New levies and now CO2 allowances with a total negative impact of €135 million have offset, as mentioned, the operating improvements.

Regarding the gross margin in Spain, the output has been 6.6% lower mainly due to a 72% lower thermal and a 14% lower nuclear production, compensated by higher margins related to extraordinary hydro conditions, an increase of 90% that lowers our cash base – our cost base. In the UK, the lower output basically linked to the Cockenzie closure and lower production of CCGT has been also compensated by higher sales due to the 7.3% increase in customers, cold weather and the tariff increase driven by the rise on non-energy costs.

As I mentioned before, 2013 is the first year with no free CO2 allocations that in Q1 amount – of 2012, amounted €40.6 million; in Spain, €12 million; and in the UK, €29 million. Net operating expenses are 5.5% down to the efficiency improvements of the group in which Spain is 4.6% down and the UK is 7.1% down.

Regarding levies, as I mentioned before, in Spain, new taxes and levies on generation have impacted €96 million on the negative side. And there is also an unfavorable €48 million comparable with 2012. And in the UK, there is a €42 million higher levies linked to the 2013 energy efficiencies programs versus 2012.

Renewable EBITDA rose by 21%, up to €533 million, as record operating performance is able, this time, to compensate the increasing levies and the regulatory measures fixing our regulated price, 5.3% below last year and the reduction of the price update to zero. By geography, Spain represents 54% of EBITDA; United States, 20%; UK, 13% and the rest of the world, 12%.

Operating capacity increases 4.6% to 14,000 megawatts and then 3.9 percentile point higher average load factor to 33.5% results in a 17% higher output. In Spain, record wind resources compensates lower levels in the UK and the U.S. This is added to an increase of a 4.5% in the average price to €71 per megawatt hour due to a lower contribution of the U.S. and despite this 5.3% reduction in prices in Spain due to the new fixed tariff.

Levies increased by 160% to €50 million, of which €26 million come from this new 7% generation tax. The net operating expenses over average operating capacity ratio improved 6%. And as a consequence, also, in this business, costs improved by 1.7%. As you can see, in all the businesses, in general, costs are coming down.

Group EBIT dropped 6.8%, showing a worse evolution than the EBITDA, mainly to a €24 million or 3.5% increase in amortizations basically due to the UK network business, also due to our accounting adjustments similar to what has been done in the operating expenses, increasing the amortization figure by €70 million.

The 0.4% decrease in provisions includes an €8 million write-off linked to renewable cancelled projects, compensated by the absence of non-recurring provisions in Brazil related to bad debts in 2012 that were €40 million.

The net financial results have improved 15.3% to minus €274 million, thanks to the interest expenses that are 15% – €50 million lower as a consequence of lower average net debt compared to 2012, more than compensating the slight increase in the net cost debt of 4.6% as a result of our increased liquidity sitting in our balance sheet.

Second, other financial results improved by €35 million, including €50 million, due to the recognition of accrued interest related to tariff-deficit spread, €31 million of derivative positive results mainly due to higher market value of our ForEx hedges, and partially compensated by a €31 million negative impact due to the increase in higher pension obligations and other provisions resulting primarily from a decline in the discount rate as a result of the new accounting methodology applied, following NIC 19 for pensions.

The reported net profit is down 14% to €879 million. The 15.3% net financial result improvement has been more than compensated by the €82 million increase in corporate tax due to the 1% UK corporate tax reduction that we had in Q1 2012. Corporate tax evolution will improve along the year. A 2% corporate tax reduction is expected in the UK during the second half of the year. The group tax rate then is expected to fall below 25% by the end of the year. Recurring net profit that excludes the UK tax impact mentioned is down 4.8% to €189 million.

Following on from the financing, the good news is that we have collected a big part of the tariff deficit. During this first quarter, there has been a reduction in the tariff deficit pending collection of €491 million, as we collected over €1 billion. An additional €432 million will be collected by Iberdrola in Q2 as the treasury has completed the securitization of the €7 billion program. The last tranche was made yesterday and this is very important and confirms the commitment of the government to its obligations, thus, taking away part of the skepticism of the market regarding this securitization program. The remaining amount of tariff deficit as today for Iberdrola is €1.4 billion. That is the excess of the tariff deficit of 2012 that will be securitized during this year.

The financial strength of the group keeps improving. Our debt has gone down at the end of March by €2 billion versus Q1 2012. Equity is improving €1.1 billion, and Iberdrola has substantially reduced its leverage to 46.1% from 48.5% at the end of Q1 2012. The balance sheet has strengthened in policy, and the cash flow generation makes possible for the company to continue to improve the credit rating metrics. FFO over net debt reaches 20.6% versus 19.3% one year ago. Retained cash flow over net debt improved to 17.6% from 15.6%, and net debt to EBITDA improves to 3.9 times from 4.1 times at the same time last year.

There is an additional €1 billion of debt reduction including – not accounted in the first quarter, including divestments already done but not collected, €624 million, and deficit securitizations in April, €432 million that reduces our debt from €29.7 billion to €28.6 billion.

Regarding divestments, French wind farms, €222 million, and Medgaz divestment, €146 million, funds are expected to be collected during this quarter. Funds from Polish wind farms, €256 million, are expected to be collected in Q3 2013.

Including the above-mentioned asset disposals and securitization proceeds, our solvency ratios improved even further as you can see in the bottom part of the slide, reaching FFO over net debt of 21.3% and retained cash flow over net debt of 18.2%.

Iberdrola has increased its liquidity up to €12.3 billion from €12 billion at the end of this quarter in – of the end of this quarter, of which €3.2 billion are in cash and almost €9.1 billion in unused credit lines, of which €5.2 billion mature in 2015 onwards. Obviously, we are not including here the €1 billion pending to collect.

With this position, we have liquidity assured for the next few years or more than 27 months, even then in the most stressed scenarios. Our target, as a matter of fact, right now, is how to improve the cost of this liquidity sitting in our balance sheet. And let me tell you that this is the sort of problems I am happy to have.

Iberdrola has a comfortable maturity calendar of its debt. We have, up to December 2014, debt maturing of €4.5 billion or 36% of the total liquidity available. We also maintained our average debt maturing over six years in line with the company’s goals.

Let me conclude by reiterating the confident outlook that we have in the positive evolution of our debt and the financial strength of the group. Thank you very much.

Ignacio Galán

Thank you, Pepe. To conclude, I would like to recall in this first quarter year 2013 has been affected by several typical factors. We have impacted the company result distorting the comparison with the previous years. Although our operational performance has been positive boosted by renewables and generation and supply businesses, the 5.5% increase in gross margin and improvement on efficiency have been absorbed by those impacts leading to a 3.3% drop in EBITDA and 4.9% decrease in recurring net profit.

So, these, in fact, are expected to recover along this in the following months. This is the case of temporary additional energy charges incurred in Brazil. The new efficiency program, ECO, and the corporation tax rate in United Kingdom. Discounting these aspects, EBITDA would have been similar to that obtained in first quarter 2012, and net profit will have grown by almost 2%.

The results are presented today constitute a step four in the fulfillment of 2012 to 2014 outlook. The company has made a significant progress in the reduction of the net debt, has been cut by €2 billion in the period. The reduction has possibly contributed to the financial leverage decrease, which stands 46.1%, 45% excluding tariff deficit.

The main driver has contributed to this. Divestment agreed totaling €1.1 billion and representing more than 50% of the total plan. Tariff deficit securitization has been reactivated. After yesterday €1 billion public placement, the total program transferred to FADE has been securitized. The only amount pending is the €4.1 billion corresponding to 2012 excess deficit, €1.4 billion to Iberdrola which will now start the process of securitization as well.

Finally, positive cash flow generated by all businesses after investment. Furthermore, we have closed the period with a liquidity position of €12.2 billion, which cover more than 36 months of our financial debt or the financial debt we mentioned, and reflect the effort the company is making to preserve its financial strength in a still-difficult environment.

The results obtained during these three months allow us to face the rest of the year with confidence. And despite the significant challenges for our businesses, we are on track to achieve the 2012 to 2014 outlook. We have the tools to obtain our objectives. Our large customer base, particularly United Kingdom, is improving our revenues. The company production means – is benefiting from the optimal wind and hydro condition this year, with a direct impact on procurement costs.

Efficiency measures already implemented will keep paying off. The €2 billion divestment plan is provisioned as planned. Investment has been progressing related to the generational cash flows in all businesses. And the tariff deficit securitization process will be finally completed when the €4.1 billion as total excess deficit are securitized according to Royal Decree Law 29/2012 in 2013 tariff order.

All in all, by the end of this year, net debt is expected to be reduced below €28 billion. And EBITDA net profit are foreseen to end up in similar levels of those reached in 2012. This will allow the company to maintain its shareholder remuneration policy.

In defense, I would like to add the remuneration to the dividend for year 2012. Next month, in July, Iberdrola will offer to shareholders a remuneration at least of €0.157 per share, including €0.03 per share to be paid in cash and derisked through the credibility dividend scheme as it was advanced in the last presentation results, and was approved by the Annual General Meeting.

Thank you very, very much for your attention. We’re ready to reply to your question now. Thank you.

Talking about this sales – forward sales to the year 2014, volumes and average price, if any. Marco?

Unidentified Company Representative

Yes. The volume is about 12 terawatt hours. And the price is about €65 per megawatt hour.

Unidentified Company Representative

Regarding Brazil, when will the recovery will be in our profit-and-loss account above this cost, the non-recovering cost in Brazil?

Ignacio Galán

Juan Carlos, can you reply?

Juan Carlos

The update in the tariff in Brazil will take place in a couple of months in between April and August. And in this moment, this will have – will consider extra costs that we have incurred in the past, and will begin to be recovered from this moment onwards, from summer onwards.

Ignacio Galán

The one is related to the tariff deficit which is our best estimation regarding the 2013 and 2014 tariff deficits we generated.

José Sáinz Armada

Hi. I’m going to answer in Spanish. Our best estimate for the tariff deficit for the end of the year is that is going to be practically zero. The result, that in the first quarter we have registered a deficit of close to €2 billion, is due to three reasons: one, the drop in demand which has been almost 4%; two, the low energy prices that have reduced tax collection; and three and fundamentally, the non-availability yet of the €2.2 billion credit that the National Energy Commission is to make use of, and the first payments of the new tax levels imposed on generation which will take place during the month of May.

So, therefore, there’s a non-operating income deficit which is the industry credit plus the fiscal levies which amount to almost €3 billion that have not yet been collected but will be collected during the year, of course.

Unidentified Company Representative

(Interpreted) The next set of questions come from Stefano Bezzato from Credit Suisse. The first one is, given the recent progress on disposal and tariff-deficit securitization, what is the debt level do you expect to achieve at the end of the year? That is – has been already answered in the presentation of Pepe.

And the second part of his question is, do you expect to meet your 2014 targets or maybe extend your share buyback program?

Ignacio Galán

Sorry. The second question is?

Unidentified Company Representative

Do you expect to meet your 2014 target...

Ignacio Galán

Yeah, yeah.

Unidentified Company Representative

or maybe extend the share buyback?

Ignacio Galán

So, well, I think we mentioned in the last – in the annual presentation in – we’re also confident that we’ll be able to achieve the targets of €26 billion we expected by the end of 2014. That makes ourselves to take the decision to make this share buyback and this amortization of capital where we are now under way.

So, probably, if the situation continues in the same condition, then we are expecting probably this decision has been taken probably can be already presented in the next future but I’ve not clearly decide yet, but I think that the sign we have already given with the actual situation is a sign which probably can already been repeated with the conditions of debt is going as well as we have expected.

Unidentified Company Representative

The second question is related to Spanish regulation. We have different questions from different people. Fred Barasi from Goldman Sachs and Antonella Bianchessi from Citi are asking about the Spanish regulation. And the question in concrete is, do you believe the government will manage to present new regulatory measures in June, or do you see the risk of delays?

Do you see the risk of generation revenues being again affected by your measures? What do you expect to be the outcome of the Spanish government review of the regulatory regime for distribution? It changed to a net remuneration more than lightly. And what do you think could be the impact of such change? And finally, is the dialogue ongoing with the government, any progress, any area of timing, do you think that this regulatory review will be the final one?

Ignacio Galán

So, well, I think we can – already started on the last point of the question. I think we are in terms with government. The new secretary, we are maintaining, let’s say, a very, very direct conversation in all items. I think, as far as we know, the plan is they will present certain package of measure by June and I think they have this – June before the summer which I think that is the plan. So, I cannot say more than that. But we are looking on that.

Related to the points of power generation distribution, et cetera, you saw the numbers. I think most – the effort required for the company is done. I think in companies like with our case, our taxes exceed our personnel cost in 30%. Therefore, this is absolutely hit, so I think the Minister has already said several times. I think the problem, he has already retaliated in Spain, he said certain analyst has been already criticizing has not been a model in either in planning, neither in the execution of the plans for the different government.

But in this government, you would see the situation very, very complicate. They took certain decision, certain event which more rational knowledge I think they took certain decision, but the plan was that this had to be absorbed by – between the consumers, the companies and the government. And I think, that, we, the companies, has already – been already charged with a tremendous cost.

I think, last year, we have – Luis offered a reduction or closed 20% of our income in our networks. This year, we are already suffering the cost of our – the extra taxes in our power generation, our hydro, our nuclear, our thermic power plant, which today, in the case of Iberdrola, exceeding 30% of our personnel costs. So, I think, therefore, we have the request to the companies there.

So, what they’re planning to do? As I mentioned several times, I’m sure they are going to try to make something rational in that respect. We have already been doing in the last few months but we have not more the information, that we are already talking with them. We are already trying to defend our best estimate. But I think the decision is within themselves, and they, themselves will have to make this one. But I think the plan is – and they plan to present this thing by June. So, we cannot say more on this respect.

Unidentified Company Representative

The second question from Fred Barasi is, please, could you confirm the likely full-year tax rate for 2013 and 2014, and in medium term?

Ignacio Galán

José Sáinz, will answer on the tax rate.

José Sáinz Armada

As I mentioned in the presentation, the tax rate will be somewhere between 20% and 25%. What we have said is that this year it will be below 25%, which is our commitment. So, at some point in this range, you were probably right. And in the tax rate of 2014, we need to – I mean there are several things going on, so we will be checking. But in principle, it shouldn’t be very different from this year.

Unidentified Company Representative

Another one from Fred Barasi is related to the disposal plan. And we have another one similar from Virginia Sanz of Deutsche. Given the strong progress on disposal and also a very high level of tariff deficit securitizations so far this year, your balance sheet is already approaching your targets for 2014. Do you retain your target of €2 billion disposal?

Virginia is asking about if we are going to – we are expected something related to disposal in the second half of the year.

Ignacio Galán

Yes, we maintain the target. You know we are a company with – we are slightly German in this sense. Then the plans are plans, and the plans are to be fulfilled. And the plan of the company is to divest €2 billion. And we are going to divest this €2 billion. So, I think we already know certain things in hand, which allow our sale that in the coming months to sell some more asset in certain places and some more stakes in another ones which allow our sale to reach this €2 billion level.

Unidentified Company Representative

The second question of Virginia Sanz from Deutsche is related to treasury stock, the amount that we have already bought and when is it going to be cancelled. And if we are – we expect to announce additional share buyback programs in the future.

Ignacio Galán

Well, I think the second question, I’ll reply, I think. We took the proposition has been taken to make the share buyback, to make this amortization of capital. So, depending how the things are moving in terms of debt, we will take or not take in the future some decision to make some more share buyback and some more amortization and the treasury stock situation, Pepe, can you reply?

José Sáinz Armada

Yeah, we have already bought around 80% of the program. These shares will be cancelled in the board meeting of May of this year, so we still have some days to complete the share buyback.

Unidentified Company Representative

Andrew Moulder from CreditSights makes the following questions. Pepe Sáinz stated that the additional €7 billion tariff deficit is transferred to Fade in 2012 has been completed. He then said that Iberdrola’s remaining €1.5 billion deficit would be securitized this year. Is this a simple process or does there need to do further legislation to transfer the 2012 excess to Fade?

Ignacio Galán

The idea – I mean what we have talked with the government is that all of these will be securitized this year. But it needs now – the 2012 tariff deficit has to be actually been finally decided or set the exact amount in the 2014 settlement which is coming out one of these days. Once this is done, it will be transferred to Fade. Then Fade will pass it to the Spanish Securities and Exchange Commission that will approve the prospectus for this program, and then it will be securitized by the Spanish Treasury. That is the process that we are now having, and we expect that it will be completed in the next months.

José Sáinz Armada

But this is a process with – can be made already in weeks. So, it’s not necessary years for making this process. I think it’s a process which is well known, and it’s not the first time we make. So, I think it’s something – or we made the things in a proper manner, I think we can already have all these ready in the next few weeks or in the next few months.

Unidentified Company Representative

The last question up to now from the Web is coming from Monica Girardi from Barclays and Javier Garrido from JPMorgan. And it’s related to the 2013 guidance already given. Can you please clarify if your net profit growth target is compared to 2012 full-year actual number or is the adjusted one?

Ignacio Galán

No. I think it’s the 2012 number so I think it’s not adjusted one. It’s the real one. €2.8 billion something.

Unidentified Company Representative

And additionally, is the target for net debt in 2013 and 2014 including or excluding hybrids? Pepe?

José Sáinz Armada

It’s net debt including – well, we account hybrids as equity. So, it is what we account as net debt.

Unidentified Company Representative

We have, up to now – we are moving towards the telephone line. We have six people are waiting. The first one is Pablo Cuadrado from Bank of America, Merrill Lynch. Pablo?

Pablo Cuadrado – Bank of America Merrill Lynch

Thank you. Good morning, everyone. Many of my questions has been already answered but probably just two quick ones. One is looking to the performance of the network business in the UK. You mentioned during the presentation that there has been some accounting adjustment for €20 million during Q1. So, how do we consider that? That that is recurrent going to the remaining quarters during this year?

And second question is basically on Brazil, if you can update us, if then there is any negotiation ongoing looking to only in Nordea, or we should expect that that is a result of the consolidation of the current structure going through next year? Thank you.

Ignacio Galán

So, I think on the case of UK, it’s recurring, yes. I think it’s according with the new – the agreement we made with Gem, the precision of the asset has to be changed. And the amount of the expenses, what can be already capitalized, is ready. So, I think that is already in the structure. I think they can be maintained in the future. So, I think it’s recurring.

In the case of Brazil, there are not more negotiations in Nordea. So, I think we are already the same with shareholders agreement we have for the last six years, in which we have already the responsibilities of managing the businesses in power generation and distribution and I think depends on the same one. So, unless the rules – the accounting international procedure change next year, we will not be allowed to consolidate the EBITDA proportionally as we made this year. So, we will make better performance this year for explaining this situation.

Unidentified Company Representative

The second one from the telephone comes from Carolina Dores, Morgan Stanley.

Carolina Dores – Morgan Stanley

Hi. Good morning. Thanks for the taking the questions. My first question is – it’s a bit of the functioning of the deficits or the possible non-deficit for 2013 because the settlements in the CNE have been negative, but they don’t include the generation taxes. Is Iberdrola and the other utilities funding the deficit for doing a few months, or it’s completely out of your balance sheet?

And my second question is that now that we had the revision of – now Energia out so coil concerning south, is €700 million something achievable for you for the EBITDA in Brazil for 2013?

Ignacio Galán

Would you reply? So, I think Pepe – just a particular thing, if you don’t mind, if you don’t have look to translate this information. So, he’s not ready very important.

José Sáinz Armada

Okay. I will – Carolina, I have the numbers here regarding the EBITDA, but I can’t – I have to look at them exactly in Brazil, but I can’t send you the exact number.

Carolina Dores – Morgan Stanley

Okay. Thank you.

Ignacio Galán

And the second one is related to...

José Sáinz Armada

To the settlements.

Ignacio Galán

Settlement of the – do you know that one, Pepe?

Unidentified Company Representative

Well, every month, we are including the accrued parts of taxes applied to generation. And another thing, as what the National Stock Exchange Commission said, if it doesn’t take this into account, and the settlement could only take into account the real collection that’s on the real revenues.

José Sáinz Armada

The idea is to be close to this €700 million that you were saying, perhaps slightly lower than that, than €700 million.

Unidentified Company Representative

Next analyst is Alberto Gandolfi from UBS.

Alberto Gandolfi – UBS

Yeah. Hi. Good morning. It’s Alberto Gandolfi, UBS. I have three as well. It looks like – I was actually – on the power distribution in Spain, it looks like your profits are coming out quite nicely. Did the new normal – should we assume Q1 at a steady-state level of profitability there?

Second question is, when we look at organic free cash flow from the business, what was it exactly in Q1 before thinking about dividends and before the tariff deficit securitization?

And the last one is, your 2014 guidance, am I right in assuming that it’s done before additional regulatory measures that we’re going to see by the summer, or did you include some in there? Can you elaborate a little bit on it? Thank you.

Ignacio Galán

So, our outlook of 2014 was already given in October last year, certainly we at that time, it doesn’t know which are the measure we cannot already taken, but our commitment continues on the same basis. Take way of Spain in the total group is important. But I think we expect, with the decision we’re taking in another areas and with the measure we are taking internally, we can already see those affect as in globally.

Related to the cash flow...

José Sáinz Armada

The FFO is around €1.1 billion, and the investment is around €640 million. So, basically, obviously, there is a lot of free cash flow coming from – in the group this quarter. So, FFO over €1 billion and investments around €600 million. So, as we mentioned, looking to how the FFO will be evolving and looking to the investment that we are foreseeing, even after the dividend payment, we’re very comfortable in cash flow generation through the year.

Ignacio Galán

So, related to distribution, I think you that the remuneration of the Spanish network is one of the lowest in Europe. I think we are 10% to 15% below average of European remuneration. And in certain cases, like United States, the UK, the amount of money which is paying per kilowatt hour of our customer in Spain and UK or United States and Spain is on the range between half and 50% level than other countries.

So, I think with the measures already taken, today, is affecting certainties with the measure we took last year after the reduction. And we took certain action in terms of investment. We took certain action in terms of expenditure. And all those things, certainly, is already being affected in positive terms, because, I think, when we took the decision. We are negative last year. And this year, it’s sort of even affected by the decision we did the previous year.

But in general, what I would like to insist, the Spanish distribution, business network, business – network business is one of the lowest in the European Union and one of the lowest in all the countries where we have already presence, so – which I think is one of the things which we have to think why we have such a level in this country toward what we have in other countries.

Unidentified Company Representative

The fourth set by the telephone comes from Manuel Palomo, Exane BNP Paribas.

Manuel Palomo – Exane BNP Paribas

Hi. Good morning. Manuel Palomo, Exane BNP. I just have two, three questions. It’s – first one, it’s a confirmation on the deficit. You’re guiding basically to the same deficit as I’m talking about the Spanish sector that the government gave in February.

However, since then, we have seen, as you mentioned, a significant demand drop and also very big renewals output. So, my question is whether you expect, number one, demand to welcome – to normalize to flattish levels which I think is what the government was including, and also, if you do not expect any impact at all from the renewals outlook being higher than we could initially expect by the beginning of the year?

The second question is on the UK liberalized business which remains, I would say, a bit weak. And also, well, what I would like to ask you is some guidance for the full year and whether you expect any recovery across 2013. And the third one, I would state for Pepe. There’s a provision of – well, the provisions for close to €60 million, out of which you detailed a couple of them. However, my question is whether we could or we should consider these provisions as recurrent provisions. Thank you very much.

Ignacio Galán

So, I don’t know if I understood totally. Related to demand, so, well, it’s true that the first month, demand was not very good in this country, but it was in the range of minus 3%, something else. But I think April is going very well. So, I think still we have nine months, and it depends how the summer – if the summer is very hot, the level of visitors that we can already have this summer, et cetera, et cetera, level of activity, how the activities are going to move in the country during the year.

Related to renewables, so it’s certain – I think we have already used 50% more wind than previous year. That is now have to be addressed further. We had already had years where the wind was not as good as this year. This year is, as far as I know, Javier, is a record windy year in this country. So, I think, normally, it’s a record windy so I think the result has been according of that one. Certain, the result is not 50% as it was again because of the reduction of remuneration has been suffered in the taxes, et cetera, et cetera, but, certain, the result is good. Related to UK and...

José Sáinz Armada

Well, I think that in UK, as we have mentioned, there is – these quarter results are depressed compared to what is going to happen now because, actually, if you compare it with last year because we have this €42 million impact. So, this means that for the rest of the year, the comparison will improve in the UK results and, obviously, we are expecting a good performance of the UK liberalized business or a better performance of UK liberalized business this year compared to last year.

And regarding the provisions, in principle, except the two things that I have mentioned, there shouldn’t be any major thing. So, it is – I suppose that it is a more normalized provision number than what we have seen last year, taking into account that also in the last part of the year of 2012, we made an important amount of provisions in our provision item.

Manuel Palomo – Exane BNP Paribas

Okay.

Unidentified Company Representative

The next question comes from Lawson Steele from Berenberg.

Lawson Steele – Berenberg

Yes. Hi. Good morning. Could you please give us an indication on what you expect for the full levies to be for the full-year on generation? Secondly, on depreciation, just want to check if we sort of extrapolate the €765 million to get to just over €3 billion for the full year. Do you think that’s fair? And then finally, just sort of a follow-up on Alberto’s question, I mean, his question really was can we extrapolate Q1 in the power distribution in Spain? I didn’t quite get the answer to that. Thanks.

Ignacio Galán

So, I think the taxes in generation, I think it should depend on several things, how the money is going to move, how the price is going to move. I think in this first quarter, I think we have already the prices were very low because of the very windy condition, rainfall was very high, and I think that makes the price very, very low. So, the taxes were not as high as we are expecting.

So, it depends on the rest of the year, how the money is going to move, how is the production of certain thing is going to be affected. So, I think we cannot give to you an estimate at this particular period of the year because it’s something which depends on several things. So, depending on pricing will move in one direction is number one, and depends on the prices and on the taxes that we have pay will be according with this one.

So, the second question is related to the depreciation – the low depreciation. Do you know what that means?

José Sáinz Armada

Yes, that is the depreciation that we are expecting. I think that the estimates that we have for this year, for depreciation and provisions will be below the €3 billion that you are talking. We are – we would be talking somewhere around 2.5 or something like that. But we are estimating for 2013.

Lawson Steele – Berenberg

And the provisions as well, right?

José Sáinz Armada

The final question, I didn’t get it.

Lawson Steele – Berenberg

Sorry. You’re including provisions on that 3% figure?

Ignacio Galán

As I understood, regarding...

José Sáinz Armada

No.

Ignacio Galán

Sorry, Lawson. No.

José Sáinz Armada

No, no.

Ignacio Galán

Lawson, could you repeat, please, the questions?

Lawson Steele – Berenberg

I just want – if you look at your total depreciation and amortization of €765 million, so is that depreciation figure – the €2.5 billion you just mentioned, does that exclude the provisions, or does that include the provisions?

And then the final bit was, going back to Alberto’s question, if you take the Q1 distribution profits, EBITDA, is it fair to assume that we can just extrapolate that for the full year?

José Sáinz Armada

Yeah, on the €2.5 billion, it includes depreciations and provisions. And in principle, in distribution, the results, the Brazilian results, should somehow improve especially in the second half. So, hopefully, that will help the results, and the rest should go more or less as they have gone in the first quarter.

Ignacio Galán

On the first question, José Luis San Pedro has already made some quick numbers on – related to the – how much is going to be – the tax is expected to recovered by the whole country – the whole system. Can you...

Unidentified Company Representative

As the Chairman said, the total taxes on generation will depend fundamentally on the price of energy, on the production structure and on the demand level. The figure we’re working with as total taxes to be collected from the generation activity is around €3 billion per year.

Unidentified Company Representative

(Inaudible) from Morningstar.

Unidentified Analyst

Good morning. I just have one question remaining. Does the recent decision ruling by the IRS in the United States with respect to how to qualify for the production tax credit for renewables, does that impact your production plans for wind or your new development plans for wind in the U.S. at all?

Ignacio Galán

So, in the U.S., as you know, we are already the second largest in the country in wind. I think we make an early move, and I think we have a presence in 22 U.S. states. Most of our production is already with long-term PPA. And – our move in this moment is not as dynamic in terms of new investment than it was in the past. So, I think the new wind farms that we are already building I think we’ve been investing in the range of over $1 billion per annum. In this moment the amount of money is much less, and we are more selective.

So, I think we will analyze case by case. We are in the situation that our presence in that has given us big chances. But the big problem that is in this moment particularly now is the low prices of energy. PBCs are important. All the tax credits are important, but the most important thing for taking a decision in this moment for building a new wind farm is the fact in the price of energy is very low. And that is making in certain cases not competitive to build new wind farms.

So, I think this one, we will analyze by 2013. For those one, we are probably now in operation. It’s not really affecting at all. And for the future, we’ll see case by case. But the main driver, and probably is the main driver is prices.

Unidentified Analyst

That’s very helpful. Thank you.

Unidentified Company Representative

Okay. The last question is coming from Antonella Bianchessi from Citi.

Antonella Bianchessi – Citi

Just a small clarification on your guidance. You said that the EBIT is going to remain stable compared to last year and that the D&A is going to be 2.5%. So, if I add up last year EBIT to 2.5%, I’ll get to an EBITDA in the region of €7 billion. Is it your guidance? Is this the guidance relative to the EBITDA or I’m mistaking something?

Ignacio Galán

Our outlook was based in the parameters of EBITDA and net profit. So, I think our EBITDA, our forecast for this year is that the EBITDA will be in the range 0% to minus 5%, and the net profit will be on the range of similar amount of previous year. So, I think that is our outlook. And I think what we make to the financial community where these two parameters, we are not already looking for gross profit, or gross margin or EBIT or whatever is – just EBITDA and net profit. These were the two – and dividend. They were the three – and debt. They were the four parameters, and we are already committed with the financial community now with outlook we make last year in October last year.

So, EBITDA for this year is to be in this range of 0% to minus 5%, and net profit will be in the range of similar to previous year. For next year, what we are forecasting is that we can keep levels of EBITDA similar to 2011, level of net profit similar to 2011, and dividend on the range of €4.3 per share. According to three years, what we have been – done last year, what we are planning to do this year. And we expect already to be maintained for next year as well.

Antonella Bianchessi – Citi

Okay. Thank you.

Unidentified Company Representative

Okay. The Q&A session is already finished, so for further questions, please feel free to contact our Investor Relations department, and we will be delighted to answer you in the best possible way.

Ignacio Galán

So, thank you very much for attending the presentation. Thank you.

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